When do you need an Appraisal

Every year, countless people in the United States buy, sell or refinance their own slice of the American Dream. Most, if not all, of these transactions include a simple line item for an appraisal. It has become an understood and accepted part of a real estate transaction. ''Let's bring in the expert and make sure we're not spending too much on this property.''

But is this the only reason to get an appraisal? Are there other times when the services of a certified, licensed, independent real estate professional might come in handy?


Property Tax Challenges

Challenging the tax assessment has become an annual ritual in many parts of the country. Unfortunately, most people go into these challenges unarmed. They may pull some information from the internet to support their claims, but have no real basis other than: ''It wasn't worth that much last year.''

A real estate appraiser can help in these situations. While it may not be economical to commission a complete appraisal to lop a few hundred off your tax bill, often an appraiser can do a limited appraisal or neighborhood analysis for much less. These documents can carry a lot of weight when you appear before an appeals board. Often, we can give you a few pointers on how you might be able to get the assessment changed that will not cost you anything other than your own time.  


PMI Removal

Private Mortgage Insurance or PMI is the supplemental insurance that many lenders ask home buyers to purchase when the amount being loaned is more than 80% of the value of the home. Very often, this additional payment is folded into the monthly mortgage payment and is quickly forgotten. This is unfortunate because PMI becomes unnecessary when the remaining balance of the loan - whether through market appreciation or principal paydown - dips below this 80% level. In fact, the United States Congress passed a law in 1998 (the Homeowners Protection Act of 1998) that requires lenders to remove the PMI payments when the loan-to-value ratio conditions have been met.

Different lenders have different processes for the removal of the PMI insurance.  Before ordering an appraisal for this purpose it is good idea to know what your lender requires and the value your property must appraise for in order to eliminate the PMI. 


Pre-Sale Decisions

Before someone decides to sell a home, there are several decisions to be made. First and foremost: ''How much should it sell for and how much should I ask?''  Secondly, should any improvements be made prior to listing it for sale?  And lastly and often forgotten, how quickly do I need to sell it? 
Appraisers can step in and help you make these decisions. Unlike a Realtor, an appraiser has no vested interest in what amount the house sells for. His fee is based on his efforts, not a percentage of the sales price.  

Some real estate agents will complete a CMA (comparitive market analysis) and call it a appraisal. For some properties in some neighborhoods this might be all you need and it is typically free, prepared by a real estate agent that wants your listing.  How often have you seen a friend or neighbor list a property for sale that sells to the first person that looks at it, at or near the list price and even sometimes more?  That seller often feels they could have gotten more, and often they are right.  Don't leave thousands of dollars on the table to save a few hundred.   


Estate Planning, Liquidation or Divorce

The loss of a loved one is a difficult time in life. Likewise, a divorce can be a particularly traumatic experience. Sadly, these events are often complicated by difficult decisions regarding the disposition of an estate. Unlike many wealthy individuals, the majority of Americans do not have dedicated estate planners or executors to handle these issues. Also, in most cases, a home or other real property makes up a disproportionate share of the total estate value.

Here too, an appraiser can help. Often the first step in fairly disposing of an estate is to understand its true value. Where property is involved, the appraiser can help determine the true value. At this point, equitable arrangements can more easily be arrived at among disputing parties. Everyone walks away knowing they've received a fair deal.